TRANSOCEAN SHIPPING AGENCY LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 4243/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9210 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIPDR
• Keywords: Capital asset; Depreciation; Bonafide mistake
• Section: 2

Judgement Text

, E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , ! '# $ %, & ' BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI AMIT SHUK LA, JM . / ITA NO. 4243/MUM/2013 ( / ASSESSMENT YEAR : 2007-08 ) M/S. TRANSOCEAN SHIPPING AGENCY LTD. SUCCESSOR TO M.S. MARINE TRANSPORT CO. P. LTD.,4 TH FLOOR, DARABSHAW HOUSE, S.V. MARG, BALLARD ESTATE, MUMBA-400001 .. / APPELLANT V/S DCIT 1(2), AAYAKAR BHAVAN, M.K. RD. MUMBAI 400020 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAACT1800E !' # $ / ASSESSEE BY : SHRI NISHANT THAKKER (AR) % # $ / REVENUE BY : SHRI NEIL PHILIP (DR) & ' # '( / DATE OF HEARING 12.03.2015 )* +, # '( / DATE OF ORDER 25.03.2015 $ / ORDER '# $ %, & (! / PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 18 TH DECEMBER 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS)7, MUMBAI, IN RELATION TO THE PENALTY PROCEED INGS M/S.TRANSOCEAN SHIPPING AGENCY LTD. 2 U/S.271(1)(C), FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE IS MAINLY AGGRIEVED BY THE LEVY OF PENALTY OF RS.3,61,18 6/- U/S.271(1)(C) ON THE GROUND THAT THE ASSESSEE HAS SHOWN SALE OF OF FICE PREMISES WHICH WAS A DEPRECIABLE ASSET AND CLAIM IT AS LONG T ERM CAPITAL GAIN. 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF RUNNING BUSINESS CENTRE. DURING THE PREVIOUS YEAR THE ASSESSEE HAS SOLD ITS OFFICE PREMI SES FOR A CONSIDERATION OF RS.23,68,000/-, VIDE SALE AGREEMEN T DATED 18.12.2006. ON SUCH A SALE, ASSESSEE OFFERED THE INC OME AS A LONG TERM CAPITAL GAINS OF RS.13,68,060/-. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS BEEN CLAIMING DEPRECIATION ON THIS OF FICE PREMISES AND THEREFORE, GAIN FROM SALE OF SAID PREMISE IS LI ABLE TO BE TAXED U/S.50 I.E. SHORT TERM CAPITAL GAIN. THE ASSESSEE ADMI TTED THAT THE CAPITAL GAIN ARISEN FROM THE SALE OF THE OFFICE PREMI SES OUGHT TO HAVE BEEN TREATED AS SHORT TERM CAPITAL GAIN AND THE COMP UTATION OF LONG TERM CAPITAL GAIN WAS DONE BY THE MISTAKE OF THE ACC OUNTANT. WHO TOOK IT AS A SALE OF A LONG TERM ASSET UNDER THE NORMA L PROVISION. ACCORDINGLY, THE SHORT TERM CAPITAL GAIN WAS COMPUTED AT RS.21,15,992/-, AFTER REDUCING THE WDV AS ON 31 ST MARCH, 2006 OF RS.2,52,008/-. M/S.TRANSOCEAN SHIPPING AGENCY LTD. 3 3. IN THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE LONG TERM CAPITAL GAIN ON THE SALE OF THE OFFICE PREMISES WA S ERRONEOUSLY CLAIMED AND INSTEAD SHOULD HAVE BEEN SHOWN AS SHORT TERM CAPITAL GAIN U/S.50 AS AGAINST IT WAS A DEPRECIABLE ASSET. T HIS MISTAKE HAD OCCURRED BONAFIDELY BY THE ACCOUNTANT, WHO CALCULATED THE SALE OF THE ASSET I.E. OFFICE PREMISES AS LONG TERM CAPITAL GAIN . HOWEVER, THE ASSESSING OFFICER LEVIED THE PENALTY ON THE GROUND T HAT ASSESSEE HAS ADMITTED THE MISTAKE ONLY WHEN THE ASSESSING OFFICER P OINTED OUT THE SAID DEFICIENCY IN THE ASSESSMENT PROCEEDINGS. ACCORD INGLY, HE LEVIED THE PENALTY OF RS.3,61,186/-. 4. THIS PENALTY HAS BEEN CONFIRMED BY THE CIT(A) ON TH E GROUND THAT IT CANNOT BE SAID THAT IT WAS AN INADVERTENT MISTAKE BECAUSE THE ACCOUNTS WERE AUDITED BY STATUTORY AUDITORS AND ASSESSE E IS ASSISTED BY QUALIFIED CHARTERED ACCOUNTANTS THEREFORE, ASSESSE E WAS WELL AWARE OF THIS FACT. ACCORDINGLY, HE JUSTIFIED THE LEVYING O F PENALTY. 5. BEFORE US LEARNED COUNSEL, SHRI NISHANT THAKKER SUBMITTED THAT THE ASSESSEE HAD SOLD THE OFFICE WHICH WAS HELD BY A SSESSEE FOR LONG AND BY MISTAKE, TREATED IT LONG TERM CAPITAL GAIN ON THE BELIEF THAT IT WAS A LONG TERM CAPITAL ASSET HELD FOR MORE THAN 3 Y EARS. THE ACCOUNTANT OF THE ASSESSEE FAILED TO TAKE NOTE OF THE D EEMING PROVISION OF SECTION 50, WHICH PROVIDES THAT SALE OF DEPRECIABLE ASSETS M/S.TRANSOCEAN SHIPPING AGENCY LTD. 4 IS DEEMED TO BE SHORT TERM CAPITAL GAIN, THEREFORE, IT CANNOT BE HELD THAT THE ASSESSEE IS LIABLE FOR LEVY OF PENALTY U/S.27 1(1)(C). IN SUPPORT OF HIS CONTENTION, HE STRONGLY RELIED UPON THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF PRICE WATER HOUSE. 6. ON THE OTHER HAND, STRONGLY RELIED AO AS WELL AS CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON P ERUSAL OF RECORDS, WE FIND THAT IN THE COMPUTATION OF INCOME FIL ED ALONG WITH RETURN, THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN ON THE SALE OF OFFICE AT NEW DELHI, WHILE TAKING COST INDEX AND PUR CHASE COST. THE SAID OFFICE WAS IN FACT APPEARING IN THE SCHEDULE OF DEPRECIABLE ASSET IN THE BALANCE SHEET. AS PER THE PROVISIONS OF SECTION 5 0, SUCH A SALE OF DEPRECIABLE ASSET DEEMED TO GIVE RISE TO SHORT TERM CA PITAL GAIN. THE ASSESSEE WAS POINTED OUT BY THE AO, THAT THE LONG TERM CAPITAL GAIN SHOULD HAVE BEEN DECLARED AS SHORT TERM CAPITAL GAIN . THE ASSESSEE REALIZING THE ERROR OF LAW, AGREED THAT IT WAS A MIS TAKE OF THE ACCOUNTANT. ON THESE FACT, IT CANNOT BE HELD THAT THE ASS ESSEE HAD FURNISHED ANY INACCURATE PARTICULARS, BECAUSE ALL TH E PARTICULARS FOR THE COMPUTATION OF INCOME OF CAPITAL GAIN WAS DULY FURNISH ED, INSTEAD OF DECLARING THE SALE OF OFFICE AS SHORT TERM CAPITAL GA IN, THE SAME WAS DECLARED AS LONG TERM CAPITAL GAIN. THIS APPEARS TO B E A MISTAKE ONLY. THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT OF THE ACCOU NTANT THAT IT WAS M/S.TRANSOCEAN SHIPPING AGENCY LTD. 5 HIS MISTAKE OF TREATING THE OFFICE AS LONG TERM CAPI TAL ASSET, INSTEAD OF ASSET APPEARING IN THE SCHEDULE OF FIXED ASSETS. ON THESE FACTS, WE ARE OF THE OPINION THAT NO PENALTY U/S.271(1)(C) SHOULD BE LEVIED AS IT APPEARS TO BE BONAFIDE MISTAKE ON THE PART OF THE ASSES SEE. ACCORDINGLY, PENALTY LEVIED IS DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF MARCH 2015. SD/- SD/- SD/ - . D. KRUNAKARA RAO ACCOUNTANT MEMBER SD/ - '# $ % & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, )* DATED:25 .03.2015 PATEL )* # '-. /.' / COPY OF THE ORDER FORWARDED TO : (1) !' / THE ASSESSEE; (2) % / THE REVENUE; (3) & 0'( ) / THE CIT(A); (4) & 0' / THE CIT, MUMBAI CITY CONCERNED; (5) .34 '5, ( 5, & ' / THE DR, ITAT, MUMBAI; (6) 4 7' / GUARD FILE. . ' ' / TRUE COPY )* & / BY ORDER 8 / 9 % / (DY./ASSTT. REGISTRAR) ( 5, & ' / ITAT, MUMBAI